A day before the two sides are scheduled to go into mediation, the Indiana Court of Appeals upheld a preliminary injunction against the Kosciusko County Community Fair.
In May, Kosciusko County Circuit Court Judge Michael Reed enjoined the Fair from holding motorized racing at the fairgrounds while a lawsuit to halt the racing winds through the courts. The suit to stop racing was filed by four Winona Lake homeowners.
In an opinion filed Thursday, the Appeals Court upheld Reed’s injunction.
On appeal, the Fair contended the four homeowners lacked standing to seek the requested injunctive relief and that the trial court erred in granting the request.
On June 27, 1989, nine original homeowners filed a complaint against the Kosciusko County Fair Association Inc. after a dispute arose regarding the operation of an automobile racetrack on the Fair’s property. As part of the settlement of the original homeowners’ lawsuit, on July 18, 1990, the Fair executed a restrictive covenant limiting use of the racetrack. The restrictive covenant provided that after Aug. 11, 1990, the Fair shall not use its property for motorized racing except for recreational and/or fairground activities other than motorized racing.
The permissible activities included truck and tractor pulling contests during fair week each year, two automobile demolition derbies each year, musical presentations, bicycle racing and rodeos.
Under the terms, the restrictive covenant was binding on the Fair and original homeowners and was enforceable by the original homeowners and their successors and assigns.
On May 2, 2018, homeowners filed a complaint requesting an injunctive relief against the Fair. They sought to enforce the restrictive covenant and to prevent the Fair from conducting motorized races on its property. Two weeks later, Reed found that Chris Cummins, a property owner, had standing to seek to enforce the restrictive covenant and issued a preliminary injunction enforcing the restrictive covenant and enjoining the Fair from conducting motorized racing on its property.
The Fair contended that in order for homeowners to have standing to sue to enforce the restrictive covenant, at least one of them had to be an original homeowner or successor or assign of one of the original homeowners listed in the covenant. The Fair said that because that was not the case, homeowners lacked standing to enforce the restrictive covenant.
The Appeals Court opinion states the restrictive covenant clearly indicates that the covenant was intended to run with the land and it is undisputed that the covenant touches and concerns the land.
Chris Cummins testified to Reed that in 1998 he purchased the property that was owned by James A. Cummins, one of the original homeowners. In light of this testimony, Reed found that Chris Cummins was a successor in title to the real estate owned by James A. Cummins.
The Appeals Court wrote, “The Fair’s challenge to this finding amounts to nothing more than a request that we reweigh the evidence, which we will not do. Because we agree that Chris Cummins is a successor in interest to one of the original homeowners, we conclude that there is vertical privity of estate. As a result, the restrictive covenant runs with the land and Chris Cummins has standing to enforce the restrictive covenant.”
The Fair contended that the homeowners failed to prove that their remedies at law were inadequate, thus causing them to suffer irreparable harm. In challenging Reed’s finding, the Fair argues that homeowners did not establish the monetary value of the harm. The Appeals Court said that the Fair’s argument amounted to nothing more than a request for the Appeals Court to reweigh the evidence, which it would not do.
In arguing that homeowners did not have a reasonable likelihood of success at trial, the Fair made four claims.
First, it claimed that the restrictive covenant could not be enforced because it lacked an essential term. In making this claim, the Fair argued that a legal description of the benefitting properties was an essential term of the restrictive covenant. The Fair, however, failed to cite any authority indicating such, the Appeals Court decided, saying, “We therefore conclude that the Fair has failed to prove that the restrictive covenant lacked an essential term,” the Appeals Court wrote.
The next claim from the Fair was that the homeowners did not have a reasonable likelihood of success at trial.
But the Appeals Court said in order to receive a preliminary injunction, homeowners only had to show a reasonable likelihood of success at trial, the Appeals Court stated. And, in part, said, “our review of relevant authority suggests that homeowners would likely succeed at trial …”
The Appeals Court opinion states the evidence in this case does not support the Fair’s assertion that homeowners delayed in asserting their right to enforce the restrictive covenant.
Chris Cummins testified that when the Fair began conducting motorized races, he and other homeowners expressed their opposition via letters sent to and in meetings with the Fair’s representatives. Fair board member Randall Shepherd admitted that the board received at least one letter form a homeowner asking the Fair to stop the motorized racing.
The Appeals Court stated, “We cannot conclude that homeowners’ action is barred … merely because they first attempted to resolve the conflict without court intervention.”
The Fair lastly claims that homeowners did not have a reasonable likelihood of success at trail because the restrictive covenant violated the rule against perpetuities.
“We agree with the conclusion of the Court of Appeals of Arkansas that a restrictive covenant limiting the use of a parcel of land does not violate the rule against perpetuities even if it is of indefinite duration. The Fair’s reliance on the rule against perpetuities is therefore misplaced,” the Appeals Court wrote.
The Fair also challenged Reed’s determination that the harm that would be suffered by homeowners if injunctive relief was denied outweighed the harm the Fair would suffer if injunctive relief was granted.
“Given that it is undisputed that the Fair had notice of the restrictive covenant, we agree with the trial court’s finding that the only actual harm suffered by the Fair is that it would be forced to abide by its earlier bargain,” the Appeals Court wrote.
The Fair argued on appeal that it would suffer about $115,000 in damages this year and would be exposed to potential breach of contract claims brought by vendors if injunctive relief was granted. The Appeals Court noted however that given its knowledge of the restrictive covenant, the Fair could not have reasonably relied on any monies generated by motorized races or conducting motorized races during its negotiations with potential vendors.
“The Fair’s argument again amounts to a request for this court to reweigh the evidence, which we will not do,” it said.
The last challenge by the Fair was that the public interest would not be disserved by the granting of a preliminary injunction. The Appeals Court said the Fair’s assertion amounts to “yet another request for this court to reweigh the evidence, which, again, we will not do.”
Representatives of the two sides are expected to meet in Columbia City at 1 p.m. Friday for a mediation session aimed at resolving the dispute.
